Revision of LLC Law

The Korean government is working on a revision of the related law for limited liability companies (LLCs) with an asset of at least 12 billion won to be subject to external audit
The Korean government is working on a revision of the related law for limited liability companies (LLCs) with an asset of at least 12 billion won to be subject to external audit

 

The South Korean government is working on a revision of the Act on External Audit of Stock Companies so that limited liability companies (LLCs) with an asset of at least 12 billion won are subject to external audit. The government is planning to propose a bill to this effect in the regular session of the National Assembly scheduled for next month.

At present, more than 90% of the LLCs registered in South Korea have less than 10 billion won in asset and, as such, the main target of the bill is likely to include global companies such as Google, Apple and Oxy, which have established their branches in South Korea in the form of LLCs from the beginning or turned their corporations in the country into LLCs in order to avoid external audit.

According to the Ministry of Strategy & Finance and the Financial Services Commission, the number of LLCs in the country jumped 52.5% from 16,998 to 25,929 between 2010 and last year. This has to do with deregulation based on commercial law revision in 2011. Since then, Microsoft Korea, Apple Korea, Louis Vuitton Korea and many more have turned into LLCs while Alibaba Korea and Tesla Korea were set up as LLCs from the outset in 2014 and 2015, respectively. Some South Korean companies and business groups are likely to be affected by the bill, too.

The degree of external audit result disclosure is drawing much attention as well. At first, the Financial Services Commission was planning to compel LLCs to disclose their audit reports. In March this year, however, the Regulatory Reform Committee recommended the commission to give a second thought, saying that the disclosure could constitute excessive regulation. Opposition parties are claiming that exemption of the duty of disclosure limited to LLCs would be an act of discrimination.

 

 

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